Research: Are Women Better at Leading Diverse Countries Than Men?

Executive Summary

Research from McKinsey has found that firms that outpace their peers on the number of women in top management see a financial performance benefit of up to 15% over the industry median. Might a similar benefit be true on the world stage? To find out, the authors studied data from 188 of the 193 United Nations–recognized countries. Their most striking finding was that women, when leading very diverse countries, were significantly more likely than men to have fast-growing economies. In these countries, female heads of state had an average of 5.4% GDP growth in the subsequent year, as compared with their male counterparts’ 1.1%.

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We know what a world dominated by men — by male CEOs, management teams, and heads of state — looks like. Consider for a moment what the world might look like if female leaders were the norm. Research from McKinsey has found that firms that outpace their peers on the number of women in top management see a financial performance benefit of up to 15% over the industry median. Might a similar benefit be true on the world stage?

Research has shown that, on average, racial/ethnic diversity within a country is negatively correlated with its overall economic growth (GDP). Racial biases, discrimination, and conflicts between ethnic groups, when left unmitigated, can stunt economic growth. We had a hunch that this is exactly where female leadership would be most helpful.

To test this idea, we studied data from 188 of the 193 United Nations–recognized countries. Our research examined leaders in modern history (1950–2004) to find out whether economic outcomes differed for female and male leaders depending on the racial/ethnic composition of the country.

Examining country level outcomes can be a complex task, as there are many factors that matter. In our research, we consider macroeconomic factors and go further to focus on the behavioral relationships between country diversity, gender of the leader, and economic performance outcomes, using a standard time-series approach.

To date, there have been 136 female heads of state (presidents and prime ministers — we excluded queens/governesses, as they are mostly symbolic). We examined over 5,700 annual periods of economic growth associated with each national leader’s regime. Our analysis controlled for other indicators of national growth such as education, infrastructure development, and the rule of law to separate out those well-established macroeconomic predictors of economic growth. We also ran tests to ensure our findings were not influenced by other global or country-specific events (for example, oil discoveries grew Equatorial Guinea’s economy by 100% from 1996 to 1997).

Consistent with our hunch, our most striking finding was about the times when women led very diverse countries rather than men. In these contexts, female leaders were significantly more likely than male leaders to have fast-growing economies. In particular, the countries in the highest quartile of racial/ethnic diversity benefited the most. When led by a woman, they had an average of 5.4% GDP growth in the subsequent year, as compared with their male counterparts’ 1.1%. Our quantitative analysis suggests that it is possible for countries and their economies to benefit from diversity instead of suffering from its challenges, which include intergroup conflicts, discrimination, and biases toward marginalized groups.

Let us be clear: This strong correlation does not guarantee women will always be successful and our research does not establish a causal relationship. Some might argue that our results are due to special circumstances in diverse countries that made it possible for women leaders to emerge or that women leaders are simply benefiting from economies that were bound to rebound. However, there is reason to believe that these female heads of state actually led their diverse countries differently than their male counterparts. Both explanations could be at play. The important takeaway here is that female leaders are associated with economic outcomes that suggest that they may be better able to unlock the benefits of diversity at the country level than their male counterparts.

In our research, we saw patterns of inclusive leadership among the female heads of state that illustrate this point. For example, when President Ellen Johnson Sirleaf led Liberia, which is one of the most diverse countries in the world and has a history of ethnic conflict, her vision was to unlock and leverage the benefits of diversity. She worked to create an “inclusive and tolerant government,” as her inaugural address put it, focused on reconciliation, making sure each ethnic group was included in proportion to its size. This was quite a feat, given that Liberia has more than a dozen prominent ethnic groups with no single group being the majority. She also set a goal of gender parity within her cabinet of appointed ministers, doubling the number of female ministers in her first year of office.

At the beginning of her second term, President Johnson Sirleaf reconstituted her cabinet further to reflect the age, gender, religion, and ethnicity ranges in the country. These strategies based on representative diversity were associated with an average annual 4% GDP growth rate in her first five years in office (2006–2010), as compared with the 1% growth of her predecessor, President Charles Taylor, in his last five years (1999–2003). Her agenda differed from her male predecessors’, particularly that of former President Samuel Doe (1986–1990), who was known for favoring his ethnic group, the Krahns, which ultimately sparked a rebellion against him. Her male counterparts’ agendas were not about the unification of the country’s various groups, but instead were about grabbing resources for their favored group.

Similarly, Taiwan’s current and first female president, Tsai Ing-wen, started her regime with an inclusive strategy. She wanted to enfranchise underrepresented minority groups, such as the Amis, the Atayal, and the Paiwan, the largest three minority groups in Taiwan. In addition, she sought to remove stigmas and biases that reinforced government policies that historically favored the Hans, the majority ethnic group.

For example, before the creation of the Council of Indigenous Peoples, a ministry-level body founded in 1996 (then called the Council of Aboriginal Affairs), many ethnic groups were not recognized by the constitution. As a result, there were inequalities in property rights and civic participation, as well as language and cultural exclusions. On the first day of her term, in 2016, President Tsai publicly apologized to aboriginal peoples for centuries of “pain and mistreatment” and called for policy changes to incentivize a shared prosperity across diverse groups in the country.

Given what our research has found, and the research on how having women in leadership roles benefits a company’s bottom line, it is clear that companies and countries should make it a priority to identify and promote talented women. Besides being the right thing to do for equality of opportunity and equity in pay, advancing women can also, as we’ve found, have tangible financial benefits.

Leaders must focus on better economic outcomes for everyone, not just gains for some groups over others. One lesson we learned from our research is that when the downsides of diversity — festering biases, discrimination, and racial/ethnic conflicts — are left unmanaged, they are associated with stunted economic growth. No company can afford to be a competitive laggard when it comes to developing all their employees, just as a country cannot maximize its growth if large parts of its populace are left out of the economy. Leveraging the diversity in your organization requires inclusive leadership that aligns strategy, culture, hiring and promotion practices, and more. It’s time to stop imagining what could be and to do the work required for an inclusive future that can benefit us all.

Susan Perkins is an associate professor of strategic management at the Liautaud Graduate School of Business at the University of Illinois — Chicago, an expert on institutional reforms, corporate governance, and organizational learning and a Northwestern University Public Voices Fellow.

Katherine W. Phillips is the Paul Calello Professor of Leadership and Ethics and the senior vice dean at the Columbia Business School. Her research focuses on the areas of diversity, stereotyping, status, identity management, information sharing, minority influence, decision making, and performance in work groups.